Some highlights from reading blog posts, articles, and tweets this week.
- Interesting Vincent Geloso thread on tax cheating according to income groups. Bottom line: As a percent of income lower-income people cheat more. I’ve always suspected this. If someone makes $30k a year and makes another $10k off the books, that’s easier to do than someone making $200k a year and making another $67k off the books. In the latter case, we get 1099s.
He gives some indirect evidence but his reasoning is similar to mine. - Happy Yeltsin Supermarket Day. A powerful story by Scott Lincicome about how Yeltsin dropped his view that Communism creates plenty. I remember hearing in a speech by the late Barry Asmus about 30 years ago that Harry Truman had said that if every Soviet citizen got a Sears catalogue in his mail on Friday, by Monday Communism would be dead. To use that line myself, of course, I wanted to see if it was accurate. I couldn’t track it down and so I called the Truman library. The person I talked to had no evidence that Truman had said that. But he should have.
- The problems with relying on regulated electric utilities to build the huge amount of infrastructure required to bring about a less-carbon-intensive electrical future. This is by the Conversable Economist. He consistently delivers quality.
- As I’ve seen saying for years in talks, the middle class has been disappearing: upward. By Daniel Griswold.
- An economist who became an important bureaucrat in the Philippines vents, with one graph, shown above, about the destruction caused by price controls.
READER COMMENTS
Andrew_FL
Sep 17 2023 at 10:36am
The quasi-religious belief in The Rich Tax Cheats has always been strange to me, because, why would the rich avoid taxes illegally, when they have so many legal avenues through which to do so? For that matter, why do so many such legal loopholes exist, if just cheating is easy to get away with?
David Henderson
Sep 17 2023 at 11:00am
I think you’re overstating the legal avenues. I have a number of friends substantially richer than me and we sometimes talk about this. If there are great legal avenues, they would sure like to know them.
Rebes
Sep 18 2023 at 3:56am
So would I. I make 7 figures. All ordinary income, no loopholes. My effective tax rate in NYC is over 50%.
steve
Sep 17 2023 at 8:39pm
The audit rate is so low for people in the $ million range that it’s a pretty negligible risk. If you are audited and get caught what usually happens is that you pay your back taxes and a penalty. According to the US Sentencing Commission only 401 people went to jail last year for tax fraud. If you receive the EITC you are probably more likely to get audited than someone making 7 figures and probably less able to get legal/accountant help if you need it. Also, the guy making $30k is likely doing some sort fo manual labor, even if it’s just retail. In order to make another $10k they have to do about another sustained 15 hours a week. That’s wearing and a lot of hours. I think employers are more lily to get leery trying to hid that many hours, not that many dont do it.
Still, I suspect tax cheating and evasion incidence, legal or not, is probably bi-modal. Higher at the bottom and top, lower in the middle. In that $200k range, +/- a bit, you are probably a wage earner working for someone else and they wont have a lot of incentive to help you cheat. At the high end you probably work for yourself or run something so you control more decisions. If you have the incentives, the ability and risk of punishment is small it kind of makes sense to at least try.
Steve
Monte
Sep 17 2023 at 9:09pm
A form of this quote can actually be attributed to Truman’s predecessor, FDR. From Remembering When Sears Roebuck Sold Cars:
By the early 20th century, the Sears catalog had become so entwined with the American psyche that the government began to use it for propaganda purposes at home and abroad. During the world wars, thousands of catalogs were sent to American soldiers at the front and convalescing in foreign hospitals to bring them a taste of home. President Franklin Roosevelt famously said that the best way to combat communism was to give them a good dollop of capitalism in the form of Sears catalogs. The Soviets took note—in 1981 they selected that year’s catalog as one of 300 works put on display in a cultural exhibit meant to inform the Soviet public about America.